Mobile, location based social networking is a young but exciting field. How will it gain mainstream adoption and how will it become a viable business, though? A new partnership announced todaybetween notable location service Loopt and high-flying mega-discount provider Groupon provides an interesting data point in the discussion.
Loopt tracks the location of users persistently, without their having to check-in manually (though you can do that too), and it will now send push notifications of Groupon deals nearby. GigaOm's Ryan Kim does a good job covering the announcement, but there are a few details in particular that I want to raise.
Backed years ago by venture capital firm Sequoia (investors in Google, YouTube and many others), Loopt doesn't get as much hype as competitors Foursquare and Gowalla. It quietly cuts deals and signs up new users, though, and regularly makes appearances at high-profile Silicon Valley technology launches.
The partnership with Groupon raises a number of issues for me.
- This looks like an aggressive move to extend Groupon's mobile availability before Facebook Deals even gets out of the gate on mobile. That's smart. Groupon's Android App already has 2.5 million installs and the company says it expects more than half its deals to be redeemed by mobile in the coming years. That's good because we've heard that the rate of redemption by email list, the method the company is best known for, is shockingly, abysmally low. Web search serves the company much better than emails and a strong move into mobile is important. Especially because Facebook is sure to do so eventually as well – and Facebook has much richer data about customers.
- This sort of partnership could work well for Location Based Services like Loopt because it puts a dedicated sales force on the task of selling deals. A large, specialized, well-known sales force. That comes at a cost, presumably, when Groupon takes its cut – but the deal might well be worth it. The gap between hype for location-based business and the sales staff of most location-based startups is big – and not all of them are focused on selling deals like this. Imagine Foursquare with a daily deals layer that could be turned on or off.
- Groupon may or may not be the best company to do this and group buying may or may not be the best model to monetize location based social networks. Groupon's 50% margins and widespread dissatisfaction among retailers (depending on who you talk to, of course), means that someone else might better execute this same model over the long run. You know what I'd pay for in a location based network? Layers of information about the places I've gone. I really would. If the Kindle can sell more e-content than paper books, why can't Foursquare sell more local history, place-based stories, etc? Up with content! Down with coupons! Or at least just Up with Content, that's what I say.
Those are my take-aways from learning about this early deal between two trailblazers in location and local business technology. What do you think?
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